Bessie Liu

Developers have a new way to build social logins into blockchain applications following a partnership between smart contract wallet Safe and Web3Auth.



The tool, SafeAuth, combines Web3Auth’s social login technology with Safe’s Account Abstraction software development kit (SDK)&nbsp;



Smart accounts were introduced via the ERC-4337 standard, built to improve the general Ethereum user experience through more intuitive and customizable crypto wallets.



SafeAuth enables users to set up smart wallets using an existing email address, removing the need to remember lengthy seed phrases.&nbsp;



These smart accounts will also be interoperable, meaning that users will be able to link and interact with different blockchain applications through a single smart account.&nbsp;



The ERC-4337 standard was deployed to Ethereum mainnet in March and <a href="https://blockworks.co/news/ethereum-smart-account-adoption-proposal">data shows</a> adoption has remained relatively slow, with weekly retention of smart wallets that use ERC-4337 dropping to as low as 1% for accounts older than five weeks.&nbsp;



Lukas Schor, a Safe co-founder, told Blockworks this should not be surprising as adoption often takes longer than people wish.&nbsp;



“The ERC-4337 standard is still in ‘draft mode’ and occasional changes … are still happening, making it harder for in-production solutions to adopt it,” Schor said.&nbsp;



Schor said that ERC-4337 also introduced additional smart contract risk, meaning it may take time for larger applications and wallets to opt in.



“Currently, the primary use-case for ERC-4337 is sponsored transactions for ‘free NFT drops’ or similar applications; we are still missing applications to leverage more complex features of accounts abstraction like recovery or sessions keys,” he said.



Read more: <a href="https://blockworks.co/news/ethereum-erc4337-account-abstraction-smart-contract">Ethereum’s ERC-4337 Account Abstraction Smart Contract is Live</a>



Tobias Schubotz, Safe’s product lead, shared optimism about the future of smart accounts. He said Safe itself has seen a 201% increase in monthly average users, now totaling more than 376,000.&nbsp;



“This indicates that Safe is being adopted faster than the overall crypto space, suggesting a growing interest and potential for smart accounts in the broader blockchain ecosystem,” Schubotz said.



“At the core of this solution is adaptability, users can choose additional authentication, such as multiple email addresses, as they deem necessary,” he said. “Similar to how one might employ a social login or email for various online platforms, SafeAuth offers a unified access method.”



Schubotz added that developer tooling such as SafeAuth can also assist in increasing the adoption of smart account standards such as ERC-4337.&nbsp;



“By offering an SDK that enables developers to seamlessly integrate a social login feature into their platform, Safe is further encouraging the adoption of smart accounts,” he said.&nbsp;



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Safe wants Ethereum users to create wallets with emails — not seed phrases

The introduction of Ethereum Foundation’s <a href="https://blockworks.co/news/ethereum-erc4337-account-abstraction-smart-contract">ERC-4337 account abstraction standard</a> earlier this year drew much attention, but adoption and retention are off to a slow start.



Existing hardware wallets rely on a pair of keys. If those keys are compromised, so are tokens in the wallet. The ERC-4337 standard was instead intended as a new baseline for how users interact with crypto wallets services, including social recovery mechanisms and other multisig options.



The standard turns Ethereum accounts into “smart accounts,” which are much more flexible to suit the needs of wallet holders.



According to data on BundleBear:



<ul>
<li>Weekly retention for ERC-4337 smart wallets drops as low as 1% for accounts older than five weeks.</li>



<li>An average smart account only sends <a href="https://www.bundlebear.com/overview/all">five user operations</a>.&nbsp;</li>



<li>Revenue for transaction “<a href="https://www.erc4337.io/docs/bundlers/introduction">bundlers</a>” is also low, currently less than <a href="https://www.bundlebear.com/overview/all">$8,000</a> per week.</li>
</ul>



Read more: <a href="https://blockworks.co/news/what-are-smart-contract-wallets">What Are Smart Contract Wallets? A Beginner’s Guide</a>



At the time of writing, daily active users are at around 3%, <a href="https://dune.com/sixdegree/account-abstraction-overview">sixdegree</a> data shows. Most smart account users today are on the Polygon network, making up over <a href="https://dune.com/sixdegree/account-abstraction-overview">66%</a> of all smart account holders and almost all monthly new users by chain.



Despite the low adoption rates on Ethereum, industry participants remain optimistic about the future of smart accounts and have been actively working on proposals to spur usage.



John Rising, the co-founder of Stackup, an account abstraction infrastructure company, notes that many existing issues with ERC-4337 can be resolved with the first-ever Rollup Improvement Proposal, RIP-7560.



The existing ERC-4337 standard is considered a “<a href="https://www.stackup.sh/blog/four-shades-of-account-abstraction">semi-native+</a>” smart account, where a user does not need a private key because the trustless relay network is designed to forward transactions to the blockchain.



Rising believes that the goal is to move towards a “native” smart account, where accounts would be able to specify their own validation logic, completely removing the need for a private key — something that RIP-7560 hopes to do.&nbsp;



“ERC-4337 has always been intended as a stepping stone to native account abstraction. The account abstraction proposal, RIP-7560, is designed to be backwards compatible with ERC-4337,” Rising told Blockworks.



Further discussions around the proposal and its applicability must still be considered. Native account abstraction has drawn concerns over the complexity it adds, as it introduces consensus layer changes rather than just high-level infrastructure layer modifications.



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Ethereum ‘smart account’ adoption is low — the first rollup proposal wants to change that

Darren Kleine

Account abstraction and concepts like user intents &#8220;add a ton of design to the space,&#8221; Chase Chapman believes. But the development of off-chain scaling solutions, she notes, could create centralized layers in the system.&nbsp;



Dune headmaster Andrew Hong says he has spoken to a number of teams about the conundrum. Some apps, such as <a href="https://blockworks.co/tag/uniswap">Uniswap</a> or <a href="https://blockworks.co/news/cow-swap-mev-problem">CoWswap</a>, could implement <a href="https://www.educative.io/answers/what-is-gossip-protocol">gossip networks</a> for the sake of transparency, he suggests.



“You can have a node network without a blockchain,” he adds. “That&#8217;s kind of what databases are, to begin with.”



Speaking on the On the Other Side podcast (<a href="https://open.spotify.com/episode/101RCD9YhLhCFNLewVx5qP?si=6028ae8e6ed24675">Spotify</a>/<a href="https://podcasts.apple.com/us/podcast/91-intents-as-protocol-moats-w-andrew-hong/id1570685120?i=1000629396628">Apple</a>), Hong says he doubts that every application will provide this level of participation, mostly for practical reasons. 



“If I&#8217;m a game developer,” he explains, “and I need things to move really quick, maybe for those [elements], it stays centralized and there&#8217;s nothing users can really do to force things to be otherwise.”



“There is some risk there.”



Hong concedes that in some cases, the trade-off between better user experience and adoption for some “layer of centralization” is probably worth it.&nbsp;&nbsp;



“Let&#8217;s say I&#8217;m playing Magic the Gathering on-chain,” he says. In this hypothetical scenario, Hong says that while he might not be able to check the game’s logic as it operates on a centralized layer, he can verify that his <a href="https://blockworks.co/news/crypto-gaming-web3-argus-labs-web2">on-chain</a> cards are under his control.



“Some components? Yes, I really care,” he says. “Some other ones? It&#8217;s like, all right, worst case scenario, I still have my <a href="https://blockworks.co/tag/nfts">NFTs</a>.”



The user intent mechanism is an attempt to find a balance between what does and does not need to be on-chain, according to Chapman. “They&#8217;re minimizing the amount of unnecessary complexity on-chain,” she says.



“You still have the outcome of your transaction. You just don&#8217;t entirely know how it got there, which is probably the case for users anyway.”



The key is to ensure that users retain the option to act directly on-chain, Chapman says, by submitting transactions to the <a href="https://blockworks.co/news/mev-privacy-in-blockchain">Ethereum public mempool</a>. “But if they want to, they can basically opt into this intent-based system.”



Chapman mentions the example of Uniswap and the recently introduced <a href="https://blog.uniswap.org/uniswapx-protocol">UniswapX</a> protocol. “If you want to take advantage of an intents-based architecture, where you have gasless transactions and you might actually end up getting a better rate, you can use UniswapX,” she says. “If you are worried about censorship, for example, then you can use Uniswap.”



<h2 class="wp-block-heading">This is not a one-way path</h2>



The possibility that UniswapX could theoretically censor user activity is a “potential threat,” Chapman says. She then wonders if it’s possible to limit activities to only interact with smart contracts through user intents.



“That, to me, is where things get a little bit scarier,” she says. “It&#8217;s basically like, forced use of a centralized provider versus optional opt-in use of a centralized provider.”



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Hong notes that many mechanisms such as whitelists and airdrop lists are “already centralized ways” of limiting user activity. “Everything&#8217;s a balance,” he says. “Yes, if you centralize things so that you can only go through intents, there probably is a censorship risk to it.”



“People like to build,” he says. “I trust the community of developers to figure this out.”



Chapman retorts, “they&#8217;re gonna build it and then eventually get slapped by the CFTC — and then we&#8217;ll be like, oh shit, censorship is a problem in these systems.”



“And then we build backwards,” Hong replies.



“We can always go back to just the contract-based way of doing things,” he says. “This is not a one-way path.” Externally owned accounts (EOAs) and smart contracts are <a href="https://blockworks.co/news/ethereum-erc4337-account-abstraction-smart-contract">features that are “never going away</a>,” Hong says.&nbsp;



“There’s at least that saving grace.”



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Account abstraction: Finding a balance between on- and off-chain activity

Without a hint of hyperbole, Blocknative CEO Matt Cutler says that account abstraction is “probably the biggest upgrade to the user experience on Ethereum as anything in the history of the network.”



It’s a difficult concept to fully grasp, Cutler admits. “It took a while for everybody to wrap their minds around it. I was super confused by it. I was reading the papers, and I couldn&#8217;t figure out what the hell was going on.”



On the Empire podcast (<a href="https://open.spotify.com/episode/06gGb49WT3N1yRAXLXhQqK?si=dc4f91a6a9544d00">Spotify</a>/<a href="https://podcasts.apple.com/us/podcast/empire/id1554930038?i=1000629188630">Apple</a>), Cutler explains a mental model for ERC-4337 account abstraction. Instead of changing already-existing infrastructure, “account abstraction introduces a new layer on top of everything else,” he says.



Read more: <a href="https://blockworks.co/news/ethereum-erc4337-account-abstraction-smart-contract">Ethereum’s ERC-4337 account abstraction smart contract is live</a>



With today’s Ethereum wallets, users sign transactions that are sent to the <a href="https://blockworks.co/news/mev-privacy-in-blockchain">public mempool</a>, Cutler says. Smart contract wallets based <a href="https://blockworks.co/news/what-is-decentralized-identity">on the new 4337 standard</a> add a “whole layer on top of that,” he says, where users express “intent” instead.



“These intents are programmable,” Cutler says. “Transactions on Ethereum today are these very fixed things, these very fixed rules that have certain characteristics or properties.”



Account abstraction allows for more flexible bundling of transactions according to user intent, Cutler explains. One advantage Cutler mentions is the ability to “abstract away” gas prices. “You could have your gas price paid in <a href="https://blockworks.co/price/usdc">USDC</a> or any ERC-20 — or even off-chain assets like a credit card or even credit card points or miles.”



This advancement “opens things up,” Cutler says, “for new types of transactions to happen” with bundlers. The bundlers are a “new class of builders,” Cutler says, that can take multiple user intents and “wrap them up, supply the gas and sign the transaction and submit to the network” via “alt-mempools.”&nbsp;



<h2 class="wp-block-heading">A Web2-like experience on Web3</h2>



Bundled user intents directed to alt-mempools allow wallets “to do much more powerful things on behalf of end users,” Cutler says. “You can provide Web2-like transaction experiences, but have it go on <a href="https://blockworks.co/tag/web3">Web3</a>.”



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Cutler gives an example of an artist rewarding a superfan with exclusive experiences. The artist could just send the superfan an <a href="https://blockworks.co/tag/nfts">NFT</a>, but this would require the recipient to be “crypto aware” and have a crypto wallet, Cutler explains.&nbsp;



An artist could instead work with a platform like Spotify, using credit card numbers to act as <a href="https://blockworks.co/news/crypto-wallet-security-phantom-brandon-millman">account abstraction wallets</a>, he suggests. “You have a private key associated with your credit card wallet, and you can literally drop an NFT into a Visa card.”



When the superfan shows up for an event, Cutler says, the asset associated with their credit card’s abstracted account could give them access to a VIP area, for example.



“Suddenly these experiences get wide open,” Cutler says, “all enabled by Web3, but massively simpler for all members of the supply chain.”



Cutler suggests the blockchain industry needs to “<a href="https://blockworks.co/news/web3-innovation-adoption">meet users where they already are</a> — like existing credit card holders,” for example.



“These things that you already have and know and use and are familiar with will get superpowers,” Cutler says, “because <a href="https://blockworks.co/news/what-are-smart-contract-wallets">account abstraction</a> allows users to become conversant and usable — and secure in this Web3 environment.”



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Account abstraction serving up Web2 convenience to Web3 users: Blocknative’s Cutler

An audited version of the Ethereum Foundation’s ERC-4337 account abstraction standard is now available on Ethereum mainnet.



The standard has been implemented through the smart contract <a href="https://etherscan.io/address/0x0576a174D229E3cFA37253523E645A78A0C91B57#code" target="_blank" rel="noreferrer noopener">EntryPoint</a>, which has been running for a few weeks already — and is designed to change how users interact with wallet services.



Most of Ethereum’s existing wallets are externally owned accounts (EOA). The list, which makes up a majority of wallets now in the <a href="https://blockworks.co/tag/ethereum" target="_blank" rel="noreferrer noopener">Ethereum</a> ecosystem, includes providers like MetaMask and imToken. 



And it even extends to hardware wallets such as Ledger Nano, where only one key controls an account — meaning that if its key is compromised or lost, any tokens within the wallet would be, too.



With account abstraction, the idea would be to make the account flexible to match users needs, according to Yoav Weiss, a security fellow at the Ethereum Foundation.



The foundation is a nonprofit dedicated to supporting the development of the Ethereum ecosystem, including its native token, ether (<a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a>).&nbsp;



“For some users, this may simply mean getting the user experience of a bank — where someone can always help recover your bank account even if you lose your password,” Weiss, an author of the ERC-4337 <a href="https://eips.ethereum.org/EIPS/eip-4337" target="_blank" rel="noreferrer noopener">proposal</a>, told Blockworks. “For more sophisticated users, it could mean adding more controls or features to your account.”



An example? Adding two-factor authentication to spend more than $5,000 dollars, Weiss said. The measure also allows users to use the cryptographic signature of their choosing, and it also authorizes transactions securely through cell phones.



Unlike EOAs, account abstraction enables users to use smart contract wallets with arbitrary verification logic.&nbsp;



“So now, users don’t need to think about writing down 12 words on a piece of paper, but instead, they are able to add and remove devices and include recovery options with a friend or a lawyer,” Weiss said.



<h2 class="wp-block-heading">Implementing an ERC-4337 standard</h2>



Account abstraction has been in the works for over nine years. It’s been difficult to reach a consensus and change an entire protocol to support it.&nbsp;



“We needed to better understand security and better understand usability, but you can’t [take] action for something that requires a protocol change because there is no input, and that’s where ERC-4337 comes in,” Weiss said.



ERC — short for Ethereum request for comment — is an opt-in standard that no one is obligated to use. Instead of changing consensus rules, ERC ensures everyone agrees to a standard before they begin using it on-chain.&nbsp;



One prevalent example: the ERC-20 token standard. ERC-20 doesn’t alter Ethereum at its protocol level. But, because developers have agreed tokens should follow ERC-20 rules, it has set a standard.



“Having a standard creates an ecosystem,” Weiss said. “And what ERC-4337 does is it will create a standard for account abstraction.”



Existing products such as Gnosis Safe and Argent have already implemented features such as social recovery. But in order to maintain them, they would have to connect to a centralized relayer.



If a centralized relayer is attacked, users would not be able to access their accounts.&nbsp;



ERC-4337 will introduce a new mempool for user operations.&nbsp;



This mempool is serviced by “bundlers” — similar to validators and miners — but on an accounts function level. So rather than submitting a transaction, a user would submit a user operation to the mempool, and bundlers will take it from the mempool and include it in blocks on Ethereum or any other EVM chain, Weiss said.&nbsp;



One of the first protocols to comply with the ERC-4337 standard for bundlers is Stackup.



“We have a test for bundlers to make sure they are ready, and stackup was one of the first ones to be ready,” Weiss said.&nbsp;



The company will allow developers to build customized Web3 transaction flows and wallets using the latest ERC-4337 smart contract.



“Developers won’t need to think about how each blockchain works, the wallet only needs to support ERC-4337, and it can be deployed and used on any EVM chain,” Weiss said.



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